CSFB's Outlook:
December SIA: 4Q Results Below Average; Fragile Q1 Ahead
•Worldwide semiconductor revenue fell by 2.3% on a 3-month moving average basis (3MMA) and rose 8.3% on a single-month basis in December. Unit growth (3MMA) was a negative 3.5%,breaking below the narrow range of +/-1% over the prior 5 months. ASPs showed positive growth for the sixth consecutive month, posting a 1.2% rise on a 3MMA basis. On a quarterly basis, Q4 revenue growth of 1.9% came in below historical average of 4.0% [and our 3.5% forecast], ending a trend of exceeding historical average during 1Q-3Q:02. For the year, 2002 revenues grew 1.3% vs. a decline of 32.0% in ‘01.
•Analog: The segment continued to post greater than seasonal growth on a m/m, 3MMA and Dec/Sept basis for December. Units, revenue and ASPs were up 3.5%, 7.2% and 3.6% on absolute m/m basis. On a quarterly basis, the analog segment posted stronger than seasonal growth in revs (+2.1%) and ASPs (+3.1%) but weaker than seasonal growth in units (-1.0%).
•DRAM: DRAM revenues increased another 2% in December, as ASP increases (up 3.9% mom)offset unit declines (down 2.1% mom) on a 3-month moving average basis. DDR premiums have come down drastically during the past couple of months to 15% as of 1/31/03, down from a 213% premium on 11/1/02, and 61% on 12/30/02.
•MPU: After updating November's data per SIA correction, which increased MPU revenues in November ~26% to $2.2 billion from $1.7 billion, MPU revenues declined 4.1% in December, on a 3MMA basis, driven largely by a 6% unit decline. ASPs were actually up 1.9% during December, on a 3MMA basis. This appears consistent with Q4 results reported from many of the PC supply-chain vendors.
•Wireless: Both wireless DSP and analog data continued to grow in December, consistent with positive supply commentary suggesting builds continued strong through December and the beginning of January. Wireless DSP units, revenue and ASPs in December were up 5.6%, 9.2% and 3.4%, respectively on an absolute m/m basis.
•We remain market-weight on the semiconductor sector and continue to favor high-end analog and unit driven diversified companies with broad end-market and broad product exposure. A fragile Q1 could be ahead as the tone from companies’ recent earnings calls cautioned of limited visibility for Q1 and guarded optimism for the remainder of the year. Our stock picks are: Large cap: STM,LLTC, MXIM; Mid cap: MCHP, MRVL; Small cap: ICST. Disclosure for stock picks: STM ($18.36, Outperform, TP $21.60), LLTC ($26.13, Outperform, TP $26), MXIM ($31.21, Outperform, TP $33), MCHP ($22.09, Neutral, TP $27), MRVL ($18.27, Outperform, TP $24), ICST ($21.00, Neutral, TP $25). |
